The small business revolution: trends in SMB cloud adoption

Transcription

1 The small business revolution: trends in SMB cloud adoption

2 02 Trends in SMB cloud adoption Trends in SMB cloud adoption 03 Gartner analysts predict cloud services will grow to $244 billion by Foreword 06 Introduction 07 About our research 08 Software for SMBs is increasingly available 09 SMB activity in those categories 10 The challenges of running a small business 12 Rising levels of SMB adoption 15 A market moving to maturity by Where does the opportunity lie? 42 Harnessing these opportunities

3 04 Trends in SMB cloud adoption Trends in SMB cloud adoption 05 Foreword John Davis, Managing Director, BCSG The small business (SMB) sector is one that s growing in size and value. World Bank research has estimated that it accounts for 95% of existing businesses2, and its products and services make up around 49.8% of the global economy. Yet this is a sector that faces many challenges. Getting a business off the ground means hard work, difficult decisions and learning on the job. Access to muchneeded expertise and support can be hard to find. However, cloudbased services are increasingly providing a viable solution to these problems. Cloud-based services are increasingly providing a viable solution to SMB needs Gartner analysts predict that cloud services will grow to $244 billion by 2017, representing a compound annual growth rate of 17.1% from Our research shows that nearly two-thirds (64%) of small business owners already have an average of three solutions in place. These are currently addressing such well-established needs as and websites. As awareness grows and software solutions become more effective at meeting SMB needs, these numbers are set to increase with a potential overall market growth of 72% in the next 3 years. Our research examines where the opportunities lie right now and how to harness them to best effect. 1. Gartner Forecast Overview: Public Cloud Services, Worldwide, 2Q13 Update, Gartner, Counting the value of SMEs to the global economy, Baker Tilly International, August 2014, counting-the-value-of-smes-to-the-global-economy.aspx (accessed 7 October 2014)

4 06 Trends in SMB cloud adoption Trends in SMB cloud adoption 07 About our research This report is based on a survey that we commissioned from Illuminas which was carried out in the second half of Responses were drawn from 600 participants in Western Europe, spread across the business lifecycle: Introduction BCSG builds and runs business application marketplaces for leading brands. Our partnerships with these leading brands provide a reach to SMBs worldwide. Through these relationships we ve seen SMBs increasingly appreciating the value of cloud-based services in helping to address key challenges. More and more software solutions are being developed for this market, aimed at supporting a broad range of small business needs, from staying on top of their finances to acquiring new customers. This technology is setting business owners free from the office, enabling them to work flexibly, and do away with the upfront cost of purchasing software. In its own way, cloud-based software is revolutionising the way that SMBs do business. Analysts see this market has huge potential for growth, and our research looks at the opportunity in detail. By surveying small businesses across their lifecycle, we ve gained key insights into current use of cloud-based software, and where we might be in three years time. pre-start ups start ups micro businesses small businesses Pre-start ups have taken significant steps towards starting their business (e.g. opening a business bank account) but haven t started trading. Start ups have been operational for up to twelve months. Micro businesses have been trading for over twelve months and have a turnover below 500,000. Small businesses have been trading for over twelve months and have a turnover between 500,000 and 5 million. This report focuses on the businesses that are currently operational.

5 08 Trends in SMB cloud adoption Trends in SMB cloud adoption 09 Software for SMBs is increasingly available A growing segment of the technology sector is focused on building software that purely addresses the needs of small businesses. For example, in October 2014, the online directory of business applications, GetApp, lists 5,896 solutions for SMBs a figure that s grown by over 20% in the previous six months. This cloud-based software can be broadly grouped by activity into the following categories: SMB activity in those categories While the SMB sector is a diverse one, its businesses share many of the same needs. These are the areas where they will be looking for support. Marketing E.g. Building websites, managing social media and sending campaigns IT support E.g. Keeping data safe and protecting against viruses Working together E.g. Communicating using or web conferencing and sharing and collaborating on files Managing customers E.g. Recording new contacts and dealing with enquiries Financial management E.g. Recording expenses and bookkeeping Legislation E.g. Putting legal docs in place like contracts or a website privacy policy and staying compliant with regulation like health and safety Managing projects & tasks E.g. Scoping, scheduling and monitoring projects Employing staff E.g. Running a payroll and creating rotas Marketing 88% IT support 79% Working together 98% Managing customers 92% Financial management 94% Legislation 79% Managing projects & tasks 88% Employing staff (payroll, managing and hiring) 79%

6 10 Trends in SMB cloud adoption Trends in SMB cloud adoption 11 The challenges of running a small business Access to the advice needed to succeed with a small business can be hard to find. In our first survey of SMBs in 2012, 70% considered themselves beginners in areas like financial management, marketing and HR when they first got started. Yet they re likely to be fulfilling all these roles, and more, as they work to build up a customer base and get money in the bank. Admin features high in their lives, too. And as a result, 66% are putting in more than 40 hours a week at work. 56% Lack of customers 46% Lack of money 36% Lack of time 28% Lack of support 66% are putting in more than 40 hours a week at work With so much to do, lack of time becomes a real risk to the success of their business, and of course it s not the only one. Others identified in our research were lack of customers, money and support. It s these risks that technology can help to alleviate. For example, applications that can manage campaigns or build and run websites not only remove the need for businesses to work with expensive agencies but also help them attract and hold on to customers. Similarly, getting a fast, up-to-date view of money coming in and going out can help a business stay on top of cash flow. And the flexible, access-anywhere nature of cloud services mean that businesses can make better use of time.

7 12 Trends in SMB cloud adoption Trends in SMB cloud adoption 13 Now By 2017 Rising levels of SMB adoption Awareness of cloud services is growing in the small business community. Nearly two-thirds of those surveyed are already using at least one solution to help them run their business. 64% of SMBs are already using cloud-based software The average number of applications in use is 3 Most of these applications provide well-established services, llike , creating a website and accepting payment. This situation looks likely to change, as consideration levels are high. 3 Average number of cloud apps currently being used 7 Potential number of cloud apps being used in the next 2-3 years 78% of businesses indicate that they are considering purchasing new solutions in the next 2-3 years creating the potential to move the average number of applications used to 7, with 88% consuming at least one service. These levels of adoption create the opportunity for the total market for cloud-based software to grow by over 70% by % Already using cloud-based software 88% Indicate they are considering using at least one cloud app in the next 2-3 years

8 14 Trends in SMB cloud adoption Trends in SMB cloud adoption 15 A market moving to maturity by 2017 Our research indicates that the adoption of cloud services is expanding to include not just early adopters but the mass market, thanks to solutions that have broad-based appeal and a greater level of connectivity. New applications are continually coming to the market and technological developments are steadily improving connectivity, which means we re likely to see businesses using more applications at every stage of their lifecycle. With more applications being used, businesses will find it harder to manage access, subscriptions and support. As a result, they re likely to turn to application marketplaces, to centralise and simplify these tasks. Better solutions As competition intensifies and application providers continue to learn more about the support SMBs need and the ways they use software, their solutions will become ever more targeted, easy to use and effective. New services will continue to be introduced to support niche tasks, and consolidation will start to take place amongst the most competitive categories.

9 16 Trends in SMB cloud adoption Trends in SMB cloud adoption 17 Marketing Where does the opportunity lie? A more detailed look at the way businesses approach the following tasks highlights the areas that are likely to see a significant uptake of cloud services. Marketing Financial management Staff employment Legislation Working together Managing projects and tasks Managing customers IT support

10 18 Trends in SMB cloud adoption 18 Trends in SMB cloud adoption Trends in SMB cloud adoption 19 Marketing The most common activities are: Building and managing their own website Managing customer bookings This is an area where 88% of small business are undertaking tasks. It includes a broad range of tasks, many of which grow in importance as businesses become more established. Right now, software use is focused on website builds, but other solutions are increasingly popular. And a significant number of SMBs are considering using software to help support key tasks in the next three years, including bookings, directory management and marketing. 88% of SMBs undertaking these types of tasks 33% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 35% currently using cloud apps to manage Creating and scheduling campaigns. How this changes through the SMB lifecycle This is a category that demonstrates a clear increase in activity as businesses move through the lifecycle stages, with engagement levels in most tasks rising as the business grows. 100% 95% 90% 85% 80% 75% Start-ups Micro businesses Small business 70% The tasks that become increasingly relevant over time are: Managing PR Running campaigns. The types of tasks involved Directories: Adding their company details to online directories like yell.co.uk and thomsonlocal.com. PR: Producing and publishing press releases and blogs and tracking PR activity. Online sales: Selling products or services online, which would include ordering and payment. Bookings: Taking customer appointments, reservations and payments. marketing: Compiling a contact list, creating templates and sending professionallooking s to customers. Search engines: Advertising on search engines like Google and Bing, to make sure their company can be found quickly and easily online. Social media: Managing social presences, creating campaigns, measuring their success and analysing their results, recording and scheduling all posts, for example. Website: Designing, developing and maintaining an online presence. Research: Getting to know customers and their needs, segmenting and targeting specific groups and getting customer feedback.

11 20 Trends in SMB cloud adoption Trends in SMB cloud adoption 21 How businesses are currently handling IT support 33% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 65%, with particularly strong growth in social media and customer service tools. The main applications include: This is an area where over 9 out of 10 small businesses are undertaking tasks. Website builder A good percentage of these businesses 47% 22% marketing 43% 15% E-commerce 34% 16% Booking system 45% 15% Social media management 32% currently have applications in place to protect them from computer viruses. This is likely to continue growing. Data back up is also growing in importance. Bigger businesses are looking for more dedicated support, to help with more varied needs and complex systems. 92% of SMBs undertaking these types of tasks 36% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 26% currently using cloud apps to manage 11% Search engine advertising 34% 12% Directory management 40% 12% PR publishing 29% 20% % of SBMs that consider they currently have a need % that currently have a software solution in place The types of tasks involved Data back-up: Making sure data is recoverable if systems crash, or hardware is lost or stolen. Anti-virus: Detecting, preventing and removing damaging software programs.

12 22 Trends in SMB cloud adoption Trends in SMB cloud adoption 23 How this changes through the SMB lifecycle How businesses are currently handling IT is important to SMBs from start-up, but as they become bigger and more established their needs increase in complexity, making dedicated support more relevant. 30% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 74%, with particularly strong growth in data back-up tools. The main applications include: 100% 95% 90% Data back-up 63% 19% 85% Anti-virus Start-ups Micro Businesses Small Business 80% 75% 70% 72% 27% % of SBMs that consider they currently have a need % that currently have a software solution in place A significant proportion are putting data and processes at risk by not having solutions in place.

13 24 Trends in SMB cloud adoption Trends in SMB cloud adoption 25 Working together The most common activities are: This is an area where nearly 10 out of 10 small businesses are undertaking tasks. Collaboration grows in importance as businesses grow, and take on staff. is of course an essential tool for working together and over half of businesses have moved over to hosted applications. File sharing is likely to be increasingly supported by software in the next three years. 98% of SMBs undertaking these types of tasks 36% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 25% currently using cloud apps to manage Using Sharing files with others. How this changes through the SMB lifecycle The importance of working together rises as a business s staff numbers grow. The tasks that show a significant rise in engagement are hosted and sharing files. 100% 95% 90% 85% 80% 75% Start-ups Micro Businesses Small Business 70% The types of tasks involved Sending and receiving using a company domain name, archiving s, sharing calendars and contacts. Sharing files: Working on the same files, accessing them from anywhere, then synchronising files so everyone can see the latest versions. Communication: Using web, video or phone conferencing. Document collaboration: Working on the same files and leaving comments for other users to see.

14 26 Trends in SMB cloud adoption Trends in SMB cloud adoption 27 How businesses are currently handling 36% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 64%, with particularly strong growth in file sharing and communication tools. The main applications include: Hosted 54% 21% Web conferencing 44% 15% File sharing 50% 18% Collaboration tools 42% 13% Managing customers This is an area where over 9 out of 10 small businesses are undertaking tasks. Customers are important to businesses from their earliest days. However it s currently the more established businesses that are using software to support activities in this area. But this status quo is likely to change in the next three years, with a high number of SMBs looking for support, especially with CRM systems. 92% of SMBs undertaking these types of tasks 36% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 26% currently using cloud apps to manage % of SBMs that consider they currently have a need % that currently have a software solution in place The types of tasks involved Managing leads: Recording new contacts, scheduling follow-up tasks, tracking customer statuses. Managing customer relations: Dealing with customer enquiries and complaints, keeping customers engaged.

15 28 Trends in SMB cloud adoption Trends in SMB cloud adoption 28 Trends in SMB cloud adoption 29 How this changes through the SMB lifecycle Customers are important to small businesses from the earliest stages of the lifecycle. Once a business has got off the ground and is trading it needs to coordinate all activities associated with finding new and managing existing customers. 100% How businesses are currently handling 36% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 64%, with particularly strong growth in CRM tools. The main applications include: 95% Start-ups Micro Businesses Small Business 90% 85% 80% 75% 70% Customer relationship management (CRM) 79% 24% Helpdesk/customer support tools 64% 14% % of SBMs that consider they currently have a need % that currently have a software solution in place The research shows that it s the most established small businesses that are using these tools, with others reliant on spreadsheets, filing systems and manual record keeping.

16 30 Trends in SMB cloud adoption 31 Trends in SMB cloud adoption Trends in SMB cloud adoption 31 Financial management The most common activities are: Recording business expenses Issuing invoices to customers and clients Taking payments. How this changes through the SMB lifecycle This is an area where nearly 8 out of 10 small businesses are undertaking tasks. Small business engagement in this category is consistently high at all stages of the lifecycle. And software use is growing. Nearly a third of these businesses are already using applications to manage bookkeeping tasks (29%), for example. Other solutions are gaining traction, giving this category a sizeable growth opportunity of 75%. 79% of SMBs undertaking these types of tasks 30% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 23% currently using cloud apps to manage Financial management is important right from the start of a business lifecycle, which is demonstrated by the consistent levels of engagement shown at every stage. 100% 95% 90% 85% 80% 75% Start-ups Micro Businesses Small Business 70% However there are some activities that become increasingly significant as a business s turnover grows, as shown below. Managing VAT Business planning Credit management. The types of tasks involved Forecasting cash flow: Calculating their cash position, knowing who needs paying and what is owed. Invoicing: Creating invoice templates, adding customer details, sending invoices. Managing tax returns: Calculating income tax, filing income tax returns. Recording expenses: Reporting and tracking expenses, receipts and bills. Business planning: Setting a strategy, describing the business and vision. Tracking performance: Producing balance sheet and profit and loss reports, income and cost breakdowns and cash flow statements. Credit management: Understanding a customer s credit risk, setting out conditions and credit limits, issuing invoice reminders and recovering debt. Taking payments: Using a till, e/pdq, or direct debits. Managing VAT: Producing reports and filing returns. Filing financial statements: Keeping company records, auditing accounts and filing statements.

17 32 Trends in SMB cloud adoption Trends in SMB cloud adoption 33 Legislation How businesses are currently handling 30% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 60%, with particularly strong growth in bookkeeping and expense management tools. The main applications include: Bookkeeping 93% 31% Expense management 69% 20% Business planning 49% 15% This is an area where nearly 8 out of 10 small businesses are undertaking tasks. As businesses mature through their lifecycle, they re more likely to look for support with legislation. Right now a small number have discovered that this help is available through software solutions. However consideration is high, giving this area a growth opportunity of 102%. 79% of SMBs undertaking these types of tasks 30% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 23% currently using cloud apps to manage Credit management 40% 7% Payment acceptance 63% 22% % of SBMs that consider they currently have a need % that currently have a software solution in place The types of tasks involved Complying with employment legislation: Creating a health and safety policy, generating staff handbooks, drawing up employment contracts. Stay legally compliant: Producing legal documents including contracts and terms and conditions, generating legal templates, putting processes and procedures in place. A significant number of SMBs clearly remain reliant on spreadsheets, complex filing systems and manual record keeping. These are both time-consuming and risky. Understanding company legislation: Receiving updates on changes that need to be considered, obtaining legal guidance.

18 34 Trends in SMB cloud adoption Trends in SMB cloud adoption 35 How this changes through the SMB lifecycle Small businesses place increasing importance on legislation as they become more established. In the days of starting up their focus is on getting basic operational elements in place. As businesses mature their awareness grows, both of the legislation and its associated risks, which directs their attention to compliance. How businesses are currently handling 30% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 76%. The main application is: 100% 95% 90% Legal document builder and compliance service 69% 16% 85% 80% % of SBMs that consider they currently have a need % that currently have a software solution in place Start-ups Micro Businesses Small Business 75% 70% A legal document builder gives businesses the documentation they need and keeps them up to date with changes in legislation. Those without software will be reliant on potentially costly advice from solicitors.

19 36 Trends in SMB cloud adoption 37 Trends in SMB cloud adoption Trends in SMB cloud adoption 37 Managing projects & tasks How this changes through the SMB lifecycle This is an area where nearly 9 out of 10 small businesses are undertaking tasks. The management of people, projects and everyday tasks all fall into this category. These activities can be very specific to business type, although involvement does typically rise as a business grows. Around 14% of businesses are currently using software in this category but consideration is high, especially for project and workforce management applications. 88% of SMBs undertaking these types of tasks 33% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 25% currently using cloud apps to manage As a business gets bigger and employs more staff, coordination and knowledge management become more important. There s a big jump in engagement in these activities with businesses turning over 500,000 plus. Project management stays relatively flat across the lifecycle, highlighting how this is an activity that s specific to business type, rather than lifestage. 100% 95% 90% 85% 80% 75% Start-ups Micro Businesses Small Business 70% The types of tasks involved Project management: Planning and managing the completion of tasks, monitoring a schedule and budget, costing and quoting for tasks. Coordinating people and jobs: Planning and managing jobs, coordinating staff, tracking time. Knowledge management: Sharing knowledge and information internally, collaborating as a team.

20 38 Trends in SMB cloud adoption Trends in SMB cloud adoption 39 Employing staff How businesses are currently handling 33% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 64%, with particularly strong growth in project collaboration tools. The main applications include: Project collaboration software 62% 14% Knowledge management 51% 14% Workforce management 60% 14% This is an area where nearly 8 out of 10 small businesses are undertaking tasks. Tasks in this category centre on finding, managing and paying staff. The businesses involved are likely to be established, with a turnover high enough to be hiring. Payroll is the activity where software is currently most in use. However all tasks will see a rise in software adoption of 31% within the next three years. 79% of SMBs undertaking these types of tasks 31% forecast to adopt cloud apps to manage these tasks in the next 2-3 years 33% currently using cloud apps to manage % of SBMs that consider they currently have a need % that currently have a software solution in place The types of tasks involved Recruiting employees: Advertising the role, identifying a suitable candidate and offering the job. Paying employees: Running payroll, submitting information to HMRC, making PAYE payments, Managing employee: Keeping employment files, carrying out appraisals and training, creating rotas and schedules, recording holidays.

21 40 Trends in SMB cloud adoption Trends in SMB cloud adoption 41 The most common activities are: Managing employees Paying employees. How this changes through the SMB lifecycle SMBs become increasingly engaged in these activities as they grow larger and more established. Some tasks, like payroll, are still relevant to start-ups, whose owners pay themselves salaries. How businesses are currently handling 31% of SMBs not currently using software in this category are considering adopting it in the next 2-3 years. This represents a growth opportunity of 62%, with particularly strong growth in recruiting and performance appraisal tools. The main applications include: Recruiting services 50% 13% 100% Human resources tool 56% 95% 18% 90% Payroll 85% 52% Start-ups Micro businesses Small business 80% 75% 22% % of SBMs that consider they currently have a need % that currently have a software solution in place 70% It s clear that many SMBs are still reliant on paper files for managing staff, outsourced providers for payment, and local press or agencies for recruitment.

22 42 Trends in SMB cloud adoption Harnessing these opportunities The current market might be described as one characterized by early adoption. The very small number of SMBs that have more than five applications in place are potentially at ease with assembling their own toolkit of software solutions. But as we move into mass market adoption for cloud services, small businesses will want simpler and easier access to a set of solutions that clearly address their needs. Relevance is key. The most popular applications in the future will be those that help with common tasks and activities. These types of solution are already showing solid rates of consideration. They can also form the basis of a strong cloud service proposition: one that delivers what customers need, while aligning to the brand in question. Established brands have a clear role to play in offering cloud-based services to SMBs. They can: Find the most appropriate solutions for SMB needs Put together a marketplace that s well-curated and easy to use Offer the reassurance that these solutions have been quality checked. Small businesses have told us that they are 45% more likely to consider cloud services if a big, established organisation is involved. And by getting involved, brands can become known as the go-to organisation for this kind of support. That then opens up many more opportunities. Trends in SMB cloud adoption 43 Small businesses have told us that they are 45% more likely to consider cloud services if a big, established organisation was involved

23 BCSG builds and runs business application marketplaces for leading brands. Our partnerships with leading brands provide a reach to millions of small businesses worldwide. Speak to us to see how we help large brands change the way in which they engage their small business customers, to grasp the opportunities available and support them in their success. facebook facebook.com/businesscentricservicesgroup twitter twitter.com/bcsgcloud linkedin linkedin.com/company/bcsg phone Copyright 2015 BCSG

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